HM Revenue and Customs

Her Majesty’s Revenue and Customs (HMRC) is a department (non-ministerial) of the government of the United Kingdom.

HMRC was created by merging Inland Revenue and Her Majesty’s Customs and Excise on April 18, 2005.

Departmental responsibilities

HMRC is charged with the responsibility of the administration and collection of direct taxes. This includes income taxes, corporation taxes, capital gains taxes and inheritance taxes.

The department also oversees the administration and collection of indirect taxes, including the value added tax, excise duties, stamp duty, land taxes, and environmental taxes such as the Air Passenger Duty and the climate change levy.

National Insurance contributions, child benefit distributions and other state support, which includes Tax Credit payments, the Child Trust Fund and national minimum wage enforcement, are all responsibilities of the HMRC. Further duties include the administration of anti-money laundering registrations for Money Service Businesses, and collection and publication of trade statistics.

Powers of officers

HMRC operates as a law enforcement agency with its own Criminal Investigators charged with investigating Organized Financial Crime. They work alongside the Organized Crime Partnership Board and are trained with intrusive and covert surveillance equipment.

HMRC investigative officers have the powers of arrest and detain anyone who has committed an offense in violation of the Customs and Excise Acts.

HMRC began a new unit of senior tax investigators under the name of the Criminal Taxes Unit starting as of June 30, 2006. Their goal is to disrupt criminal activity by targeting criminal gangs.

Structure

The department has four main operational groups: Personal Tax; Benefits and Credits; Business Tax; and Customer Compliance.

History

HM Customs & Excise merged with Inland Revenue following the new department’s announcement on March 17, 2004. It received Royal Assent from the Commissioners for Revenue and Customs Act of 2005. The Revenue and Customs Prosecutions Office (RCPO) was also created by the Act for the purpose of prosecuting all Revenue and Customs cases.

HMRC proposed on November 12, 2015 that it intends to combine and replace local offices into 13 regional centers by 2027.

Governance structure

The Board develops and approves the department’s overall strategy, approves the business plans and advises the Chief Executive on key appointments. Members of the Executive Committee and non-executive directors make up the composition of the Board. The Treasury Minister who is responsible for HMRC is the Financial Secretary to the Treasury.

Chairman

Until 2008, The Chairmanship of HMRC was an executive role. Since August 2012, the chairman post was abolished and replaced with a Lead non-executive Director who chaired the Board meetings.

Controversies

Child benefit records misplacement

Chancellor of the Exchequer, Alistair Darling, announced in November 20, 2007, that two discs had gone missing that held the personal details of all families in the United Kingdom claiming child benefits. The missing discs, thought to affect approximately 25 million individuals in the UK, include personal details such as name, date of birth, National Insurance number, and bank details.

Mr. Darling stated that there was no indication pointing to the disks having fallen into criminal hands. Still, he urged citizens involved in claiming child benefits to stay alert and monitor their bank accounts.

IT problems

From 1994 to 2004, EDS ran Inland Revenue’s tax and National Insurance system. A new tax credit system, implemented in 2003, over-paid two million people a combined £2 billion. A fine of £71.25 million was paid by EDS due to the massive failure.

The contract was awarded to Capgemini in 2004. This contract, valued at £2.6 billion, is one of the largest outsourced IT contracts ever made.

HMRC encountered another IT problem after the implementation of their tax modernization program in February 2010. The program called ‘Modernizing Pay-as-you-Earn Processes for Customers (MPPC), was launched in June 2009. Its first test came from annual coding, which issues certain codes to tax payers on a yearly basis.

This time, the annual coding process sent out incorrect tax coding notices to some taxpayers and their employers. This caused them to pay too much tax the following year.

Underpayments to ethnic minority claimants

Seven HMRC staffers deliberately underpaid benefits to ethnic-minority claimants. The department operates a zero-tolerance policy on racial discrimination, said Dave Hartnett, permanent secretary for tax at HMRC. The seven were fired in August 2010.

Goldman Sachs deal and surveillance of Osita Mba

Whistleblower Osita Mba leaked information to The Guardian that HMRC negotiated a deal with Goldman Sachs allowing them to avoid paying £10 million interest on unpaid tax. Following this allegation, HMRC misused its powers under the Regulation of Investigatory Powers Act (RIPA). They examined the emails, internet search records and phone records of Osita Mba, and even the phone records of his wife to find out if he had spoken to the editor of The Guardian, David Leigh.

Members of Parliament in the House of Commons’ Public Accounts Committee praised and defended Osita Mba. A report from the committee called for scrutiny into HMRC’s use of RIPA powers:

“We are deeply disappointed by HMRC’s handling of whistleblowers. We consider that HMRC’s use of powers, reserved for tackling serious criminals, against Mr. Osita Mba was indefensible. HMRC told us that it had changed how it deals with whistleblowers and that it now provides information to its audit and risk committee who can use this to challenge how HMRC handles whistleblowers.”

Call waiting times

Callers to HMRC are frustrated over long holding times, a report from Citizens Advice highlighted in September 2015. According to the report, “thousands” of callers were on-hold an average of 47 minutes per call at considerable expense to the caller in many cases.

HMRC hired 3000 additional staff to respond to the calls, even though they complained that the “unscientific and out-of-date survey of tweets” did “not represent the real picture”.

The National Audit Office reported in a June 2015 communication that the percentage of calls answered by HMRC fell from 79% to 72.5% from the periods 2013–14 to 2014–15. A report that followed in May 2016 suggested that performance had improved as a result of the recruitment drive.